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The supply of DRAM memory is likely to stay tight for a substantial period of time, according to Frank Huang, chairman for Taiwan-based pure-play foundry Powerchip Technology.

DRAM makers have not opened new lines for five years, said Huang, adding that industry leader Samsung Electronics is putting increased focus on its 10nm foundry and NAND flash offerings.

Technology is the key to the development of China's DRAM industry, and Micron Technology has started to pay attention to potential infringement of its existing patents, Huang identified. Patent issues could slow down the development of China's emerging DRAM companies including Yangtze River Storage Technology, Fujian Jin Hua Integrated Circuit and Hefei Chang Xin, Huang said.

Competition in the world's DRAM industry could become less competitive than that in the IC foundry industry, Huang indicated. It is more difficult for China to develop its local DRAM sector than to expand its presence in the foundry segment, Huang said.

Meanwhile, major DRAM firms are facing more challenges as technology enters the sub-20nm era, Huang indicated. Manufacturing costs will no longer be reduced through die shrinking in the sub-20nm era, while building a new fab is already not cost effective for the DRAM sector.

On the demand side, despite a shrinking PC market, booming server demand and upcoming 5G network wills consumer large amounts of DRAM chips, Huang noted. South Korea is expected to launch the world's first 5G network at the 2018 Winter Olympics in Pyeongchang, demonstrating the support of large memory capacity for a huge number of videos being uploaded at high speeds, Huang said.

Huang anticipated that in the long run, the global supply of DRAM memory will remain tight.

In addition, Powerchip's 12-inch fabs are all running at full capacity, according to Huang. The company operates three fabs for the manufacture of specialty memory, LCD driver ICs, power management chips and sensors on a contract basis.

Powerchip's P1 and P2 fabs are capable of producing a combined 60,000-70,000 wafers per month, with half of the capacity allocated for the manufacture of memory chips. Powerchip's P3 fab with monthly capacity of nearly 30,000 wafers is dedicated to producing DRAM products for Kingston Technology.

Powerchip generated net profits of NT$6.57 billion (US$216 million) in 2016, down 36%, with EPS coming to NT$2.96. The company is confident its net profits will return to NT$10 billion in 2017, Huang said.